Yesterday, U.S. stocks experienced one of their worst days of the year. The S&P 500 declined more than 2 percent for the third time this year, and after today’s action, all of the major averages are underwater for the year.
In light of stock valuations that have admittedly become somewhat high, and with first-quarter earnings results expected to be lackluster after a harsh winter, investors have rotated out of the biggest winners of 2013 and into more defensive alternatives such as bonds and value stocks. Growth and high-PE stocks such as technology and biotech stocks, and small-cap equities have been particularly hard hit: The NASDAQ and the Russell 2000 are both off roughly 8 percent from their early-March highs.
Read more about Special Market Update 04-11-14
The markets are under pressure today despite a strong report this morning from the Labor Department. Today's new unemployment claims data came in-line with the recent strengthening U.S. economic trend: the Labor Department announced that fewer Americans filed new unemployment claims last week than in any week since before the beginning of the Great Recession. New jobless benefits applications fell to 300,000 in the week ended April 5, the lowest level since May 2007, and down from 332,000 claims during the last full week of March. The number significantly undercut the expectations of most economists.
Read more about Volatility Persists 04-10-14
Having spooked investors after the Federal Open Market Committee policy meeting two weeks ago by implying that interest rates could start to move up roughly a year from now, Federal Reserve Chair Janet Yellen this week obliquely revisited the touchy subject of future tightening. “The scars from the Great Recession remain, and reaching our goals will take time,” she said Monday at a Chicago community development conference.
This time she focused on the level of long-term unemployment and the attendant hardships that have “shattered lives and families” of average, hard-working Americans, who suffered the devastating effects of losing their jobs, inability to find replacements, running through their savings, losing their homes and feeling the strains on “marriages and other relationships.” Read more about Refocusing the Markets on the Work Ahead 04-03-14
The S&P 500 Index again neared record territory this week on the strength of good economic data before falling back some. Fourth-quarter 2013 growth in the U.S. gross domestic product (GDP) came in at a final estimated rate of 2.6 percent, according to the Bureau of Economic Analysis. The growth in real GDP was slower than the 4.1 percent rate in the third quarter of last year, despite a 3.3 percent increase in percent personal consumption expenditures, but also reflected decreased government spending during the October federal shutdown plus bad December weather.
That struck the markets as good news, all things considered, with analysts having predicted a 2.4 percent increase in GDP. Much as the BEA and economists had expected, the GDP price index rose 1.6 percent at an annualized pace and the price index of core personal consumption expenditures, excluding food and energy, rose 1.3 percent annualized. Read more about Economy Grows and Unemployment Falls 03-27-14
It seems that matters economic once again are looking up—as we expected and previously outlined in this space.
Further bolstering the bullish case for the economy, today the Conference Board released its latest reading on its Index of Leading Economic Indicators, with a strong, 0.5 percent month-to-month increase catching analysts by surprise as compared to their expectations of a 0.2 percent rise.
Also out today, first-time applications for unemployment benefits stayed near a four-month low, at 320,000, last week, according to the U.S. Labor Department, which also reported today that the four-week average of Americans filing initial jobless claims actually fell to its lowest level since late November. The slowing number of dismissals could precede an increase in hiring as demand rises, economists suggest. Read more about New Guidelines and Timelines 03-20-14